Chain COLA

Chain COLA is a new system to measure and set inflation-triggered cost of living adjustments for retirees.

Currently those January COLA adjustments are tied to the consumer price index (CPI). Although retirees have not had a COLA in two years, critics say the CPI system overestimates inflation. They argue that using a different yardstick would take into account spending adjustments people make in hard times (like now) and produce a truer estimate of costs. Bottom line, going to the chained COLA would reduce, by some estimates, future inflation-adjustments by half a percentage point, or more. Net effect would be smaller raises in future for federal, military retirees and people who get Social Security benefits. Reducing Social Security increases even a small amount each year would rack up billions of dollars in future savings. Estimated saving over 20 years is $100 billion.